What Is a Change Order in Construction? Your Guide to a Crucial Component of Contracting

September 10, 2021 by Michael Gober & Denis Gritsiyenko

You are working on an exciting project for a new client and things are going great — you’re on schedule, everything is running smoothly, and your client seems happy.

However, the project hits a snag at one of your progress report meetings.

Your client wants to make a few additions that are outside the original contract. Taking on the additional work will delay your deadline — and cost more in materials and labor.

It is time for a change order.

So what is a change order, and how do change orders work?

This guide will answer those questions and help you keep your projects on track.

If you are wondering how to create a change order, read on to find out what it should include and how to go about it.

CM Fusion: We Help You Keep Track of Change Orders to Manage Your Business Efficiently
What Is a Change Order?
How Do Change Orders Work?
2 Ways Change Order Management Can Be Improved
3 Tips for Making Construction Change Orders Work for You
With CM Fusion, Your Worries About Juggling Construction Change Orders and Other Documents Can Be Over

CM Fusion: We Help You Keep Track of Change Orders to Manage Your Business Efficiently

While no one likes them, change orders are just another part of the job when it comes to construction.

Unforeseen circumstances come up and things change.

Contractors have to be ready to handle it all. But keeping track of paperwork is not an easy task — especially on the job site.

That is where CM Fusion comes in.

CM Fusion is a cloud-based construction management software designed for contractors — by contractors. With CM Fusion, you can keep all your documents in one place.

We have dealt with the hassle that change orders can bring, and we decided to find a better way. With the help of some software engineers, we created CM Fusion, the solution to project management.

CM Fusion works for both contractors and property owners to create a seamless workflow that keeps things moving smoothly and on schedule.

With CM Fusion, you can ...

Create
Manage
View; and
Monitor

… all of your change orders in one place.

Keeping up with change orders has never been easier.

30-Day Free Trial

What Is a Change Order?

No doubt you’ve heard of them but, by definition, what is a change order?

A change order is an official document that is drawn up to request an alteration to the original contract.

Change orders amend a construction contract to allow for unforeseen issues that may arise. While typically submitted by the contractor, change orders can be created by either party.

How Do Change Orders Work?

You are three weeks into a project. As you walk through the job site, one of your supervisors approaches you to talk.

She lets you know that some supplies needed for the next phase have been delayed. You both know that this will push back your timeline, and you will no longer be able to complete the project within the time specified on the original contract.

It is time for a change order.

You head to the trailer and log onto CM Fusion and:

Click open your preferred template
Add in the needed information; and
Send it off to your client

The client then views and approves the change order online, and you are free to continue the job.

Sounds easy, right? That is because, with CM Fusion, change orders are easy.

And, everything is saved for quick access. Should you need proof of that change order three months down the road, simply log into your CM Fusion documents.

Change orders protect:

You
Your client; and
Your team

What Should Be Included in a Change Order?

At this point, you may be wondering how to create a change order.

While every change order will be slightly different, there are some things that they should all have in common.

A change order needs to include, in full detail:

An explanation of what exactly is being changed and how it relates to the original plan
A list of any additional costs that will be incurred by the change
A list of any costs that will be saved by the change
Documentation of any new subcontractor costs
Information on any effects the alterations will have on the original timeline
Signatures from both the contractor and the property owner/customer (regardless of who created the change order)
Specifications on when the other party needs to respond or request additional information

What Circumstances Lead to Construction Change Orders?

Considering that roughly 35% of construction projects utilize change orders, there are many reasons you might find yourself writing one.

A contractor may create a change order because:

Materials or personnel are going to arrive later than expected
An unplanned interruption has occurred
The original budget/schedule did not accurately portray what would be needed
Unexpected obstacles came up, causing the project to need to take a new direction
Inclement weather is forcing the project to pause

A client might submit a change order if:

They want to add or change something in the design
They need to amend budget quotes
Their boss needs something changed
They want to take the project in a different direction

How Should You Prepare for Construction Change Orders?

Prevention is the best cure, and that goes for change orders, too.

Ideally, your initial contract will outline the change order process and how they will be handled, should they arise. By including the process in the contract, you can help eliminate conflict that may occur as a result of unexpected obstacles.

If you did not include a change order process in your contract, don’t worry, all hope is not lost. Open, honest communication from the start is a great way to ensure that change orders will be well received.

Another great way to ensure a positive change order process is to act quickly and efficiently. Whether you are submitting or receiving the order, acting quickly ensures that there are minimal delays.

Even if you have a great relationship with your client, never begin the altered work without them agreeing (in writing) to the change order.

Working outside your contract is a good way to end up in a lot of trouble.

How to Submit a Change Order

Once you have completed the change order and made sure that it includes everything needed, it is time to sign and submit.

Traditionally, you would have to email, fax, or even hand-deliver the change order.

CM Fusion makes submitting change orders easy by allowing your client to view — and approve them online.

Follow the Payment Application

Be sure to follow the payment application outlined in your contract.

Save all pertinent documents and carefully record all related costs.

Closely following guidelines laid out in the contract helps to protect you and your team.

Get Everything in Writing

No matter what direction the change order takes, ensure that you have everything in writing, including:

Documents
Signatures
Change orders; and
Contracts

While no one ever hopes for a dispute or problem to arise, there is no such thing as being too prepared.

Before CM Fusion, contractors had to:

Create dozens of folders and store files in countless locations
Battle overflowing file cabinets
Sift through never-ending piles of papers stacked precariously on their desks
Hope and pray they didn’t accidentally throw away that one really important paper

But with CM Fusion, you can easily keep track of everything — right there within the software.

2 Ways Change Order Management Can Be Improved

No matter how well a company runs, there is always room for improvement and in construction, that needed improvement is often within the change order process.

Change orders have long been the bane of the contractors’ existence.

But some simple things can be done to make managing your change orders easier.

#1: Enhanced Communication Throughout the Construction Process

As with almost every part of life, communication is golden.

When proper communication is not present, change orders can quickly escalate and become points of contention between parties.

CM Fusion simplifies the process by easily keeping everyone on the same page.

From the contractor to the client — and everyone in between — open and concise communication is the key to keeping things professional.

#2: Increased Data Availability for Better Change Order Management

Gone are the days when no one could access the data and documents they needed.

Making sure that everyone involved has access to relevant data and information is key to ensuring that everyone can communicate well and make informed decisions.

With CM Fusion, you can now guarantee that anyone who needs to access each document can easily do so from their phone or desktop.

3 Tips for Making Construction Change Orders Work for You

In many contract relationships, one party gets hung out to dry while the other reaps great benefits.

With change orders, it isn’t uncommon for the first party to be the contractor and their team.

Change orders aren’t fun for anyone, but they usually mean more work for contractors, and they sometimes mean less money, too.

Here are some things you can do to ensure that you are not negatively impacted by change orders.

#1: Don’t Put Off Change Orders

As much of a hassle as change orders can be, you must refrain from procrastinating.

Waiting to create and submit a change order only leaves everyone involved feeling irritated and even further behind.

Dealing promptly with issues that arise allows you to remain on schedule as much as possible.

#2: Make Sure You Document Everything

From emails to phone calls to conversations, be sure you document everything that you can.

Never make an agreement that does not have signatures. Verbal agreements are not official and should be avoided at all costs.

Utilizing the proper channels protects both you and your client.

#3: Ensure You’ll Be Properly Compensated for Changes

Along with most change orders come new costs. You must ensure that you will be adequately compensated for the changes.

If you require additional materials that will up the overall project price, provide those details. If labor will be extended, quote that as well.

Your team relies on you to make certain that they are fairly compensated, and you have to make sure that you communicate to your client any new financial changes.

With CM Fusion, Your Worries About Juggling Construction Change Orders and Other Documents Can Be Over

Change orders can bring a lot of stress and annoyance, and unfortunately, they simply cannot be avoided.

But now that you know what a change order is and how change orders work, you are better equipped to handle them professionally.

With CM Fusion, you don’t have to stress about your change orders. We make the process easy with streamlined software designed to keep everyone in the loop.

You will love the customizable templates — and your clients will love the ease with which they can view and respond to change orders.

CM Fusion takes the challenge out of change orders and allows you to get back to the part of your job that you love; being in the field.